Mortgage Applications Drop Again, But Refis Remain Strong

Home loan applications overall fell 0.8 percent last week as rates on FHA loans rose, according to the Mortgage Bankers Association (MBA).

Michael Fratantoni, the MBA’s chief economist, said conventional mortgage rates remained near record lows, in the 3 percent range, for the week ending July 24, and that refinances continued to slightly increase.

Rates on FHA loans rose, however, leading to a nearly 18 percent drop in FHA refinances.

“Homebuyers stepped back slightly, and there was a larger drop in purchase application volume for FHA, VA and USDA loans,” Fratantoni said in a statement.

It was a different story just two weeks ago, when the MBA reported that mortgage applications surged by a third as June turned into July. 

The Weekly Mortgage Applications Survey revealed that the Refinance Index decreased 0.4 percent from the week ending July 17, but was more than double on the same week one year ago.

Meanwhile, the seasonally-adjusted Purchase Index slipped 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 21 percent higher than the same week one year ago, the MBA reported.

Refinancing was the healthiest mortgage sector, as homeowners continue to take advantage of historically low rates. Refi activity increased to 65.1 percent of total applications, from 64.8 percent the previous week. 

Applications for FHA loans decreased to 9.6 percent from 10.8 percent the week prior. The VA share of total applications increased to 11.2 percent from 10.8 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior.

The average interest rate for a 30-year, fixed-rate mortgage for a loan balance of $510,400 or less was unchanged last week at 3.2 percent, while the 30-year, fixed-rate mortgages with jumbo loan balances was flat at 3.52 percent.

Apartment List, a San Francisco platform that connects renters and listings, reported that a record number of tenants and homeowners, 32 percent, missed some or all of their rent or mortgage payments in July.

While rates are at historic lows, a survey by the Pew Research Center found that one-third of millennials have been laid off due to COVID-19. Another 42 percent said their pay has been cut, researchers reported. As a result, many millennials are not in the housing market.